PE market growth to continue

The Thinking Ahead Institute (TAI) recently released research that highlights the growing importance of the private equity market to both companies and investors.

Increasing demand from investors for private equity has been significant, with the industry growing more than 500 percent since 2000, valued at over USD3 trillion in 2019. This has corresponded with changing dynamics in how companies are raising capital.

Liang Yin, senior investment consultant at the Thinking Ahead Group, said: “Today’s knowledge-based business models tend to be asset light and having a significant proportion of investment in intangible assets acts as a drag on earnings. In addition, regulatory pressure and the rising ongoing costs of being a listed company have led more businesses to raise capital from private markets, where there is an abundance of available capital.”

Firms have also been incentivised by the longer timescales for returns that exist in private markets. Even General Partners’ (GPs) five to seven-year cycles are preferable to the pressure of quarterly reporting demanded by public markets.

“As a result, public market investors are now accessing companies at a later stage of their development than in the past. When these companies list publicly, they emerge as mature and large companies, which can lead to public market investors missing out on significant growth opportunities and reduce the attractiveness of such investments,” Yin said.